Michael Ward: Great. And then maybe on the, in the slide deck, the macro commentary kind of seemed a little bit less cautious to us. Just curious if you might agree with that. There’s a lot influx, kind of with the Fed and rates and inflation, but just curious how your clients are feeling if there’s, I guess, a little bit more positivity or uncertainty, vice versa.
Powell Brown: Yeah. So I think that we continue to, as we said in our comments, see inflationary pressure and things trending down. And we do — it’s very interesting, Michael, that there is a more, I believe, optimistic view in our consumer base, even in light of some of the challenges that face us globally. So it’s a unique dynamic and how ultimately people continue to think about investing in their business is yet to be determined. We have historically, over the past year, talked about, we use the term this quarter cautiously optimistic. I think that’s a very, very good way to put it. But we’ve seen over the past year, people sort of pause on making major capital investments, i.e, buying the new machine versus doing some maintenance work.
I’ll be interested to see this year if our customers buy the new machine. And so that’s yet to be determined. But there is definitely a feeling of optimism in our client base, not all of them, but I’m saying if you made a broad generalized, it is more optimistic. Yes.
Michael Ward: Interesting. Thank you. Maybe one last one. Just on free cash flow. I think cash flow conversion for you guys was a little below 24% in ’23. Just curious if we should expect that similar level into next year or this year, if there’s any puts and takes there.
Andrew Watts: Yeah, Mike, for ’24, we think — at least, on the ratio of cash flow from operations, we’ll let you guys drop in kind of what you think on the CapEx and everything, but we’re thinking 22% to 24% on cash flow from Ops as a percentage of revenues, feels like a pretty good range for us.
Michael Ward: Great. Thank you, guys.
Powell Brown: Thank you.
Operator: Please standby for the next question. The next question comes from Grace Carter with Bank of America. Your line is open.
Powell Brown: Hello?
Operator: Hey, it does appear that she did drop. One moment for our next question, please.
Powell Brown: Okay.
Operator: Our next question comes from Scott Heleniak with RBC Capital Markets. Your line is open.
Scott Heleniak: Yeah. Good morning. Just interesting that the comments you made on the economy and how your customer base is feeling. But I’m wondering if you could follow up on the comment you made on — you mentioned that the buyers were exhausted. I know you mentioned that last quarter, increasing deductibles, lowering limits. Did you see that accelerate at all in the past few months? And where are you seeing that most by customer type, the different behavior where they’re changing the terms and conditions?
Powell Brown: Well, let’s back up for just a moment. I don’t think that there’s necessarily one customer type or one region, but I’m going to give you an example. But this is not only the capacity in this example. If you take a condo association in Florida, and for the last five years in a row, they’ve seen rate increases. They’re exhausted and tired of it. And in some instances, the condo association will shoot the messenger, even though we are delivering the best product in the market. And so whether you apply that same philosophy to a manufacturer, a developer, an owner of nursing homes, a non-profit, whatever the case may be, I believe, Scott, sometimes people in the analyst community believe it’s all about rate increases.
And as Andy said earlier, it’s — it can be about rate, but really it’s more about the absolute dollars that the insured has to pay. And so there is a lot of chafe when their exposure units are flat to down and their premium dollars are going up. That’s the way I try to put it. And so there’s not one class of business, I will tell you this, that our organization, if you make a broad statement, we can thrive in a market where the rates are going up, when the rates are sideways, and when rates are going down. Generally speaking, in Retail, it works in all of those. In Wholesale, it works up or down, generally flat is kind of a little weird, and it works in Programs. So that’s kind of a very broad statement around your question on rates.
Scott Heleniak: Okay, that’s definitely helpful. And then I was just wondering, could you refresh us on the captive revenue, what you had in 2023 versus 2022 and kind of your long-term growth view on that business and where you kind of — how you’re viewing that over the next five to 10 years?
Andrew Watts: Let’s see. I don’t know. We probably won’t go that far out. But if we look at the captives as we generated $25 million plus last year, generated about $30 million in 2023, and then we’ve kind of given an idea of guidance of what we think it looks like for 2024. We’re really, really pleased with the captives, with the growth we’ve delivered on the top line, as we mentioned, the alignment with our carriers and the returns that they provided for the capital that we’ve put into those. We’re extremely, extremely pleased with them. So don’t take that that means that we’re going to do more of them, whatever. That’s not the comment. But for the ones that we have, we’re very, very pleased with the programs that they sit on top of. And again, they’re sitting on programs that we think deliver some of the best underwriting results in the industry.
Scott Heleniak: All right. Understood. All right. I appreciate the answers. Thanks.
Andrew Watts: Thank you.
Operator: Please standby for the next question. Our next question comes from Brian Meredith with UBS. Your line is open.
Brian Meredith: Hey, thank you. Powell, I think you may have answered this, but I just want to clarify here. This inflation — how big of an impact is inflation on your organic revenue growth? So if I kind of look going forward, obviously the economic outlook is still decent right now, but inflation clearly moderating. Is that a headwind to organic growth when we think about it from an exposure perspective?
Powell Brown: I think if you want to think of it in a textbook answer, the answer is yes. But in practical application, I think it’s a neutral.
Brian Meredith: Oh, interesting. Is there certain types of inflation that are better or worse for you all’s business?
